10-QPeriod: Q1 FY2020

QUANTA SERVICES, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 8, 2020For Securities:PWR

Summary

For the first quarter of 2020, Quanta Services, Inc. (PWR) reported consolidated revenues of $2.76 billion, a slight decrease of 1.5% compared to the same period in 2019. While the Electric Power Infrastructure Services segment saw revenue growth, the Pipeline and Industrial Infrastructure Services segment experienced a decline, primarily due to a reduction in larger pipeline projects and impacts from adverse weather and COVID-19. Net income attributable to common stock significantly decreased by 67.9% to $38.7 million, or $0.26 per diluted share, largely impacted by project timing and a substantial deferred earnings recognition in the prior year's comparable period. The company managed its cash flow effectively, generating $227.5 million in operating cash flow, a significant improvement from the prior year. However, the company is navigating challenges related to the COVID-19 pandemic, which has led to disruptions and expected impacts on future performance, particularly in the Pipeline and Industrial Infrastructure Services segment.

Financial Highlights

53 data points
Beta

Revenue

$2.76B

12.0% Gross Margin

Net Income

$41.50M

1.5% Net Margin

EPS (Diluted)

$0.26

Total Assets

$8.23B

Cash & Equivalents

$377.20M

Free Cash Flow

$159.44M

Financial Statements
Beta
Revenue$2.76B
Cost of Revenue$2.43B
Gross Profit$332.20M
SG&A Expenses$230.79M
Operating Income$80.74M
Interest Expense$14.01M
Net Income$41.50M
EPS (Basic)$0.27
EPS (Diluted)$0.26
Shares Outstanding (Basic)144.45M
Shares Outstanding (Diluted)146.79M

Key Highlights

  • 1Consolidated revenues for Q1 2020 were $2.76 billion, down 1.5% year-over-year.
  • 2Net income attributable to common stock decreased by 67.9% to $38.7 million, or $0.26 per diluted share.
  • 3Operating income declined by 32.4% to $80.7 million, influenced by project completion timing in the prior year.
  • 4Net cash provided by operating activities was $227.5 million, a substantial improvement from the prior year's net cash used of $82.8 million.
  • 5Remaining performance obligations increased slightly to $5.37 billion, indicating a stable project pipeline.
  • 6The company took proactive measures to manage the impact of the COVID-19 pandemic, including cost management and operational adjustments.
  • 7Significant revenue declines in the Pipeline and Industrial Infrastructure Services segment were partially offset by growth in the Electric Power Infrastructure Services segment.

Frequently Asked Questions

The significant decrease in net income was primarily driven by year-over-year comparability issues. The first quarter of 2019 benefited from the recognition of $60.3 million in previously deferred earnings from a large electric transmission project in Canada, which did not have a comparable event in the first quarter of 2020. Additionally, the Electric Power Infrastructure Services segment experienced lower operating income due to the completion of that large Canadian transmission project and delays on other transmission projects.

The COVID-19 pandemic began to impact operations in late Q1 2020, primarily through shelter-in-place restrictions causing disruptions in certain service areas, especially major metropolitan markets. The pandemic also exacerbated existing challenges in the energy market, contributing to reduced demand for industrial services and causing delays in permitting and regulatory processes. The company expects further material impacts in Q2 2020 and beyond.

The Pipeline and Industrial Infrastructure Services segment faced significant challenges in Q1 2020, with revenues decreasing primarily due to reduced capital spending on larger pipeline projects and the impact of adverse weather and COVID-19 restrictions. The company anticipates a further reduction in revenues from larger pipeline projects for the full year 2020 compared to 2019. The challenging energy market and low commodity prices are expected to negatively impact customer capital budgets and demand for services in this segment.

Quanta Services maintained a strong liquidity position, with $377.2 million in cash and cash equivalents and $1.35 billion in available commitments under its senior secured credit facility as of March 31, 2020. The company generated $227.5 million in operating cash flow during the quarter, a significant improvement. They are actively managing costs through reductions in discretionary spending, hiring and compensation deferrals, and deferrals of non-essential capital expenditures to navigate the uncertain economic environment.